Remarks by Administrator Seema Verma at the ALEC Policy Summit
(As prepared for delivery – November 29, 2018)
Thank you.
It’s an honor to be here at the ALEC Policy Summit with so many state legislators.
The first thing I want to say is thank you. Thank you for your service to your country and to the citizens of your state.
I don’t think I need to remind most of you how hard it can be to get things done in this town.
The federal government just isn’t as nimble and responsive as state governments.
State leaders are closer to the people and the problems they face each day, which gives you the knowledge and the motivation necessary to take action and make the tough policy decisions needed.
That’s why it’s so important for states to retain a strong, lead role in taking on the toughest problems facing this country and that is especially true for health care.
I have spent my entire career working to make sure people have better access to health care … including working on the front lines at a public hospital and working with states to design innovative programs to address the problem of the uninsured. And, before I came to CMS, I worked with states as they wrestled to implement the Affordable Care Act.
Seeing the problems the ACA created and seeing the lack of federal action to address these problems should be proof enough for why it was such a mistake to federalize so much of health care policy under the ACA.
So I come to this job with a belief that Washington doesn’t have all the answers when it comes to our health care needs…that states are the laboratories of innovation and reform…and that care decisions centralized in Washington too often come at the expense of patients.
While the Affordable Care Act expanded coverage, it has not addressed health care spending. After the law was enacted in 2010, research shows there has been no change in the rate of growth.[1]
The reality is that the rate of growth in health care spending has been a crushing financial blow for too many families … especially the millions of Americans who are unsubsidized and have had to face rising premiums, fewer insurance choices and in some cases an inadequate network of medical providers.
And no one can say this is due to the Trump Administration. This chaotic and declining market is what the Administration inherited in 2017.
Let’s examine the facts.
We were told annual premiums would drop $2,500 per family. Yet, average premiums rates for plans in states using Healthcare.gov rose by 105 percent from 2013 to 2017, the final year of the Obama administration.
105 percent … what other product or service in the economy more than doubled in price over those four years? Nothing on my shopping list.
Some states had it even worse, such as Alabama, where premiums increased by a jaw dropping 223 percent over that time.
At today’s prices, it’s no surprise unsubsidized people are now leaving, actually fleeing the market. There was a 20 percent drop in unsubsidized enrollment nationally between 2016 and 2017.[2] That’s 1.3 million people walking away in just one year. Some state markets are faring far worse, with a 40 percent drop in six states…and Arizona losing over 70 percent of its customer base. 2018 enrollment data suggest this downward spiral among the unsubsidized may be accelerating.[3]
It is no hyperbole to say that this unsubsidized portion of the market is now in a death spiral in many states.
One reason prices are so high is due to the decline in choice and competition in the market. Today, in over half the counties in America, consumers have access to one insurance issuer.
With no competition, these monopoly insurers have the market power to hike rates. For anyone who understands how competition delivers better value to consumers, it should come as no surprise that a recent study found that Exchange premiums were 50 percent higher, on average, in rating areas with a monopolist insurer.[4]
The ACA attempted to insure every American, and even tax those who refused to pay for it, but because nothing was done to control costs, the insurance problem has not been solved … for many Americans, it has been made worse.
Facing these rising prices and dwindling choices, no one should have been surprised when the President charted a different course.
On day one, President Trump issued an Executive Order directing agencies to minimize burdens caused by Obamacare and provide greater flexibility to states and cooperate with them in implementing health care programs.
And within three weeks, CMS issued a proposed Market Stabilization Rule. This rule delivered on a number of policies industry analysts had advised to strengthen the market.
Building on the Market Stabilization Rule, CMS issued the 2019 Payment Notice rule to give states additional tools to stabilize their health insurance markets.
President Trump also signed legislation zeroing out the individual mandate tax penalty. This was a perverse tax that charged people for not buying something they could not afford. Worse, the tax fell to lower income people – nearly 80 percent of the households paying the tax earned less than $50,000 annually.
The Administration has also opened up more affordable coverage options by expanding Association Health Plans and short-term plans, which can provide a lifeline to certain people priced out of the individual market. While these plans are not for everyone, we have made certain that consumers are informed about the limitations of these plans.
Analyses show that these steps will open up dramatically more affordable coverage options for certain people, expand the number of people with health coverage, and with only minimal impacts on the rest of the insurance markets.
We believe there’s room to provide these new options while still working to strengthen the individual market.
One strategy we’re hoping can further strengthen the individual market is to allow employers to fund individual market premiums.
In October, the Administration proposed an exciting new policy that would allow employers to fund individual market premiums for their employees through Health Reimbursement Arrangements (HRAs).
The HRA proposal would give employees an incredible amount of control over their health care while at the same time keeping the employer involved as a strong partner in maintaining coverage.
Under our watch, we have also enhanced the capabilities and operations of the Exchange, providing more consumer assistance tools, and implementing a new streamlined and simplified direct enrollment process for consumers signing up for Exchange coverage through private agents and brokers and issuers. The results … the Exchange Call Center hit an all-time high customer satisfaction rate, averaging 90 percent through open enrollment last year.
So, we’ve been incredibly busy working to promote more affordable coverage options. Now let’s examine the results.
Because of these actions, premiums are stabilizing. Average premium rates for a benchmark plan on Healthcare.gov will decline by 2 percent in 2019, the first decline in the ACA’s five years. Yes, some might say 2 percent isn’t much of a drop, but it is a large departure from the double digit increases of recent years. And there are a number of states with larger declines, including a 26 percent drop in Tennessee and a 16 percent drop in Pennsylvania.
Another good sign is that insurers are expanding into new markets. There are 23 more issuers for 2019 than 2018. Only five states will have one issuer, compared to ten states in 2018.
With increased stability it is no surprise that—despite dire predictions—the uninsured rate also remained steady in 2018, as a new report from the CDC shows.[5]
So, I am having a real hard time understanding all of the criticism leveled at this Administration. Critics see subterfuge. The reality … we’ve delivered stabilization.
I am so proud of how the dedicated team at CMS has been able to deliver a set of policies that balance the need for market stability with the need for immediate relief from rising premiums.
But let’s be clear, while the ACA’s vital signs have stabilized, the patient remains in critical condition.
Stabilizing already high rates means you still have high rates. Millions of Americans are still priced out of the insurance marketplace.
For those of you who know me, you know I’ve spent years as a consultant to states and it was my job to find innovative solutions … to be a problem solver.
Based on that experience, I know there are opportunities for states, but I also know that Washington is too often an obstacle to innovation. Washington is where innovative policies go to die on the altar of bureaucratic worship.
Now that I’ve moved from Indiana to Washington, I’m working to change that.
The federal government should be working in closer partnership with states to support and foster innovation. In fact, President Trump’s first executive order directed federal agencies to “provide greater flexibility to States and cooperate with them in implementing healthcare programs.”[6]
So, last month, we took a major step toward empowering states to address the problems caused by the ACA by giving states broader flexibility to waive certain ACA requirements and create real alternatives.
Under the law, a state can waive these requirements so long as the new state health care program meets a set of four guardrails. Specifically, a waiver must provide coverage that is at least as comprehensive and affordable to a comparable number of people as without the waiver. In addition, a waiver must not increase the federal deficit.
Unfortunately, guidance issued under the prior administration in December 2015 significantly thwarted the types of creativity and innovation states could pursue.
With this unnecessarily restrictive guidance in place, very few states have come forward with innovative new strategies for improving their health care markets.
Before I came to CMS, I worked with states on 1332 waivers and found it was impossible to put forward creative ideas. Under these severe limitations, the States I worked with essentially gave up.
Compared to the prior guidance, this new guidance empowers states to provide relief through a number of new tools. Most importantly, the guidance increases flexibility with respect to the guardrails. The guidance also provides new functionality for states to leverage components of the federal Exchange platform and work with private industry.
After we issued this guidance in October, we received some criticism that the guidance opened opportunities to reduce federal protections for people with preexisting conditions.
To be very clear, the ACA’s pre-existing condition protections cannot be waived. In addition, the President and Secretary Azar have both made clear we will protect people with pre-existing conditions.
Critics of state flexibility will always assume the worst. Indeed, cynics will always be able to imagine negative ways states might screw up if given some flexibility. If a state does get something wrong, unlike the federal government, states have the flexibility and the incentive to fix it. This is because it’s much easier for citizens to go to their state legislator’s office or the governor’s office than to have to come to D.C.
It’s amazing how little faith Washington has in each of you to do what’s best for the citizens who elect you.
In addition to this new guidance, I am pleased to announce that, today, CMS is releasing four Waiver Concepts to help illustrate how states can take advantage of this new flexibility.
Though the new guidance substantially expands state flexibility, I know states would benefit from further details and examples of how to use the flexibility.
For one example, maybe the example with the best potential to address various structural problems with the ACA, I went back to something I tried in Indiana. Under this approach, a state could provide a cash contribution to an account that people would manage, and could use to pay both premiums and any out-of-pocket health expenses.
This approach would empower individuals to pick the plan that works best for them and their families. It would maximize consumer choice and engagement, giving people stronger incentives to make smarter decisions with their health care dollars and increase the demand for price transparency because they directly retain the benefit of any unspent dollars from the account.
An account also creates the best opportunity to create true portability and continuity across Exchange, Medicaid, and employer-sponsored coverage. To the extent the account is compatible with other financing sources, a person could seamlessly transition from one to another as income and eligibility for programs change.
Further, the defined contribution to the account can help control premium growth and, as a result, limit the growth in public subsidies by establishing a clear individual health care budget up front. Compared to the present subsidy that’s set to match premium growth each year, a defined contribution can help establish a personal budget up front and drive insurers to set coverage and premium levels to meet that budget, which creates at least some pressure to contain premium growth.
Consumer engagement, personal freedom and choice, spending smarter, price transparency, portability, and controls over premium growth … what’s not to like?
Earlier in my career I had the honor of working with then Indiana Governor Mitch Daniels to create the nation’s first consumer directed Medicaid program. What we found was that Hoosiers, no matter what their socioeconomic status was, wanted control of their healthcare and when given the opportunity to control their own health-accounts, they used the system more appropriately, such as fewer trips to the ER, and had better health outcomes than those who merely received a government controlled handout.
The account-based approach might hold the most promise. However, we’ve released three additional waiver concepts that can work in conjunction with these accounts or separately.
- States can develop a new state premium subsidy structure and decide how premium subsidies should be targeted;
- States can set the rules for what type of health plan is eligible for state premium subsidies to give people access to more health plan options; and
- States can implement various risk stabilization strategies to address the costs of high-risk individuals to reduce premiums in the market for everyone.
These waiver concepts are offered as a springboard to spur innovative thinking among states on how to develop better health care programs across the country.
Ever since President Trump took office, critics have accused the Administration of intentionally sabotaging the ACA.
What they conveniently ignore is that the hard facts show that the individual health insurance market was in serious trouble when President Trump took office.
People needed more affordable health coverage options and everything this Administration has done has focused on delivering more affordable options.
There is much more work to do and, coming from Indiana to DC, I know it cannot be done without partnering with states.
As state legislators, I hope it is now clear to you that the Trump Administration is here to support your efforts to develop local solutions to provide your citizens with higher quality, more affordable health coverage. That’s why we released new guidance on waiving ACA requirements and, today, the waiver concepts illustrating how states can make use of this flexibility.
I believe in the states to make innovative decisions to improve the health of their residents. What works in Michigan may not work in Montana. For too long states have looked to Washington with a “mother may I” approach, and Washington has placed unworkable restrictions on the states…in the process undermining the very goal of its own policy…which was to make insurance more accessible by making it more affordable.
Today, we are saying the states have the power to make the individual markets work through innovative policies that best meet the needs of your citizens. We are returning freedom, authority and innovation to you, state lawmakers. And I believe the results will be better, and more Americans will be insured because of it.
Thank you.
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[1] https://www.healthaffairs.org/do/10.1377/hblog20171205.607294/full/
[2] https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2018-07-02-Trends-Report-2.pdf
[3] https://www.kff.org/health-reform/issue-brief/data-note-changes-in-enrollment-in-the-individual-health-insurance-market/
[5] https://www.cdc.gov/nchs/data/nhis/earlyrelease/Insur201808.pdf
[6] https://www.federalregister.gov/documents/2017/01/24/2017-01799/minimizing-the-economic-burden-of-the-patient-protection-and-affordable-care-act-pending-repeal